Volkswagen could face a massive fine for using 'illegal' software to cheat emissions standards

Volkswagen Jetta with TDI engine. AP The Environmental Protection Agency says nearly 500,000 Volkswagen cars violate clean air standards after the carmaker used "illegal" software to bypass emissions tests. As a result, the German carmaker faces a fine that could run into the billions.

VW could be subject to a maximum civil penalty of $37,500 for each of 482,000 cars that are affected, an EPA official told Business Insider.

If you do the math, that adds up to $18 billion.

BP, the oil company, in July agreed to pay $5.5 billion for violations of the Clean Water Act, as part of a much larger federal and state settlement.

The EPA accused VW of using hidden software — called a "defeat device" — to dodge clean-air standard during emissions testing.

"Using a defeat device in cars to evade clean air standards is illegal and a threat to public health," assistant administrator for the Office of Enforcement and Compliance Assurance Cynthia Giles said in a statement.

"Working closely with the California Air Resources Board, EPA is committed to making sure that all automakers play by the same rules. EPA will continue to investigate these very serious matters." General Motors this month agreed to pay $900 million to settle a criminal probe on its failure to recall cars with faulty ignitions linked to more than 100 fatalities.

And last year, Hyundai and Kia paid a $300-million civil penalty when the EPA concluded that the automakers had sold 1 million vehicles that emitted more than had been certified with the government agency.

However, in a statement to Business Insider, an EPA spokesperson said that there are multiple ways VW could be assessed a penalty.

VW Beetle TDI. Volkswagen Bloomberg also reported that the alleged violations could be referred to the Justice Department "for criminal prosecution."

The EPA has not issued a recall, it said in a separate statement to Business Insider. Rather, the agency issued a Notice of Violation, alerting VW that it believes it ran afoul of the Clear Air Act.

"Manufacturers are given a reasonable amount of time to develop a plan to complete the repairs, including both the repair procedure and manufacture of any needed parts," the EPA said. "Depending on the complexity of the repair and the lead time needed to obtain the necessary components, it could take up to one year to identify corrective actions, develop a recall plan, and issue recall notices."

The EPA alleges that VW installed software that detects when the car is undergoing emissions testing, at which point the software would turn on all of the car's emissions control systems. But the EPA claims that the software greatly reduces the cars' pollution-control systems during normal driving conditions.

"This results in cars that meet emissions standards in the laboratory or testing station, but during normal operation, emit nitrogen oxides, or NOx, at up to 40 times the standard," the EPA said in a statement.

The Volkswagen Golf TDI engine. Volkswagen In response, Volkswagen issued the following statement to Business Insider:

Volkswagen Group of America, Inc., Volkswagen AG and Audi AG received today notice from the US Environmental Protection Agency, US Department of Justice and the California Air Resources Board of an investigation related to certain emissions compliance matters. VW is cooperating with the investigation; we are unable to comment further at this time.

The recall affects 482,000 diesel-powered cars sold in the US since 2008. They include:

Volkswagen Jetta TDI: 2009-20015

Volkswagen Beetle TDI: 2009-2015

Audi A3 TDI: 2009-2015

Volkswagen Golf TDI: 2009-2015

Volkswagen Passat TDI: 2014-2015

This story is developing. We'll update it when more information is available.